The rules are about to change again for Qualifying Recognised Overseas Pension Schemes (QROPS).
If your retirement savings are already in a QROPS or you plan to switch offshore, you need to know how the new regulations will affect you and your money.
So here’s a quick guide to the changes and the thinking behind them.
Overview of the changes
The changes aim to tighten up QROPS tax rules to make sure that pension money transferred out of the UK remains available to finance an expat’s retirement.
In some cases, pensions are transferred to a QROPS and then onward to an unregulated financial product that can bypass HM Revenue & Customs (HMRC) rules for QROPS.
The new rules extend reporting rules to closed QROPS in line with policy objectives stated by Chancellor George Osborne in Budget 2012.
The main rule calls for QROPS managers to continue to notify HMRC of unauthorised withdrawals and the status of their scheme, even if the QROPS is not receiving new transfers or has been removed from the tax man’s QROPS list.
The measures also allow overseas public service and international organisation QROPS to ease benefits relief tests so QROPS status is not lost under the last round of rule changes. This plugs a hole in the legislation that may have led some schemes to lose their QROPS status unintentionally.
The benefits relief test stops QROPS schemes paying enhanced benefits to non-resident retirement savers that are not otherwise available to pension investors in the financial jurisdiction where the QROPS is based.
Who is affected?
Retirement savers with money in a QROPS and British pension savers or international workers with UK pension rights planning to transfer their money to a QROPS.
QROPS professionals, like fund managers, trustees and administrators of current and former QROPS, also come under the new regulations.
The focus is mainly on former QROPS schemes based in financial centres like Guernsey, Singapore and Cyprus. Just over 300 QROPS were delisted in Guernsey in April 2012 as they failed the benefits relief test.
Many QROPS investors have moved their pension in to QROPS schemes based in Malta from the jurisdictions that have had schemes removed. Since the HMRC closed down many schemes and jurisdictions, Malta has become the most popular country to transfer UK pensions to.
When do the rules start?
The new regulations are proposals rather than laws. HMRC is inviting comments from QROPS investors and professionals by June 21, 2013. Once comments are collected and considered, the proposals will pass in to law and are retrospective to April 6, 2012.
Full details of the new regulations are available on the HMRC website https://www.hmrc.gov.uk/news/draft-qrops-regs2013.htm
Comments can be emailed to HMRC’s pensions policy unit firstname.lastname@example.org